Pending lawsuit is not a bar to PIP complaint

A Superior Court judge has ruled that an auto insurer could bring an action for declaratory judgment stating that it did not have to pay a PIP claim because of “non-cooperation” by an insured, even though a non-payment action by the provider who gave post-accident treatment was pending in District Court.

The insurance carrier claimed that the insured and her passenger had refused to produce documentation or complete an examination during its investigation of the accident.

The provider, who was also named in the declaratory judgment action, argued that in light of its pending District Court claim, the insurer’s action should be dismissed as impermissible “claim-splitting” under Rule 12(b)(9) of the Massachusetts Rules of Civil Procedure.

But Judge Dennis J. Curran disagreed.

“Although the issues in the instant case and in the district court proceeding are intimately related, neither [the insured] nor [her passengers] are parties to that litigation,” Curran wrote in denying the provider’s motion to dismiss. “For this reason … dismissal … is not appropriate.”

Francis A. Gaimari of Fireman & Associates in Needham, who represented the defendant provider, said the ruling thwarts the legislative purpose behind the District Court’s “one trial” system.

Until the Legislature created the one-trial system, the District Court had no declaratory judgment or equity jurisdiction, so anyone seeking such relief had to file a separate action in Superior Court, Gaimari said. The Supreme Judicial Court itself recognized in its 2002 Herman v. Home Depot decision that the system was enacted to eliminate that type of practice, he said.

“The Legislature enacted the one-trial system to allow the District courts to decide the ‘entire case’ and afford ‘complete relief’ to increase efficiency in the courts and prevent exactly what [the insurer] did here: have one part of the case in the District Court and another part of it in the Superior Court,” Gaimari said.

He also said he has seen insurers file declaratory judgment actions in Superior Court while PIP claims are pending in District Court more than a dozen times.

Gaimari added that oftentimes the “real motive” of insurers engaging in the tactic is to serve suit on an unrepresented layperson, usually a non-English-speaking person to whom service is made “last and usual” at an address where they no longer reside, in order to have that person default. Then the insurer can secure a declaration of non-cooperation, which it can use to try and defeat the District Court action, he said.

Though Gaimari said he did not have sufficient facts to conclude that the injured persons in the case at issue did not receive actual notice, he did note that the address of one of the patients was not the same in the complaint as it was in her medical records.

Meanwhile, he said, “enlightened Superior Court judges have been denying motions for entry of final judgment after default on the ground that piecemeal litigation is to be avoided. And a number of District Court judges have been giving no credit to these [default judgments] simply because they see the obvious: that they are shams.”

Salem attorney Robert E. Mazow, who represents medical providers seeking to recover unpaid PIP claims, said he found it “curious” that the insurer waited more than a year after the District Court case was initiated to file its declaratory judgment action.

“It seems to me that while the insurer was within its right to file the action in Superior Court, it should have filed in the District Court at the same time it filed its answer on the underlying District Court action,” Mazow said.

Pointing out that the defenses — failure to cooperate with the insurer — would be the same in either setting, Mazow said, “if the District Court doesn’t stay the underlying trial and the Superior Court ultimately allows [the insurer’s declaratory judgment] action, this will lead to an inconsistent outcome and a waste of judicial economy.”

Ronald W. Dunbar Jr. of Boston, who represents insurers in PIP cases, said the ruling provides a useful tool for insurance companies.

The decision “makes clear that … an insurance company is free to file a separate declaratory judgment action in Superior Court to obtain a declaration that, at the end of the day, may be a complete resolution of the underlying PIP claim in District Court,” he said.

Dunbar added that it is important for insurers to be able to clarify their obligations at the outset of a dispute instead of sitting back and relying on a policy provision as an affirmative defense.

“[T]here is always the danger to the carrier that its initial policy determination is incorrect and could result in greater liability to the carrier down the road, such as … multiple damages and attorneys’ fees,” he said. “The filing of a declaratory judgment action is prudent practice for insurance defense counsel and is further evidence that a carrier is acting in good faith.”

Shahan J. Kapitanyan of Smith & Brink in Braintree represented the insurer. He declined to comment.

Dual action

In early November 2009, defendant Sasha Baptiste, who had an auto policy with plaintiff Government Employee Insurance Company, or GEICO, was involved in a car accident.

PPT submitted Pizarro’s medical bills in the amount of $3,569 to GEICO for payment under the PIP provision in Baptiste’s policy, but the insurer declined to pay.

On April 5, 2012, PPT sued the insurer in District Court alleging violations of the PIP statute, G.L.c. 90, §34M, and G.L.c. 93A for its nonpayment of PIP benefits.

GEICO asserted an affirmative defense of noncooperation in that action, alleging that Baptiste and Pizarro refused to produce documents and complete an examination during the insurer’s investigation of the accident.

A pre-trial conference was held as the case was scheduled for jury trial this September.

GEICO subsequently filed an action in Superior Court against Baptiste, Pizarro and PPT, seeking a declaratory judgment that Baptiste and Pizarro were uncooperative in its investigation and thus it was not responsible for any payments under Baptiste’s PIP coverage.

PPT moved to dismiss, arguing that Superior Court had no subject matter jurisdiction over the action since the amount of money at issue was less than the $25,000 statutory threshold for that court.

Additionally, PPT contended, because its own action involving similar issues was pending in District Court, the case constituted “claim-splitting,” necessitating dismissal under Rule 12(b)(9), which bars bringing a claim in one Massachusetts state court during the pendency of a prior action in another.

“PPT is correct that the Superior Court has ‘original jurisdiction of all civil action for money damages [in which] … there is no reasonable likelihood that recovery by the plaintiff will be less than or equal to $25,000,” the judge said, quoting G.L.c. 212, §3, the provision that sets out the jurisdictional threshold.

However that provision applies only to civil actions for money damages, he said. “Where GEICO seeks only a declaratory judgment … the amount-in-controversy limit does not apply.”

Turning to PPT’s argument that the declaratory judgment action amounted to claim-splitting, Curran noted that that would only be the case if the parties and issues were identical to those in the prior pending action.

Here, the issues may have been intimately related but the parties were not the same, since Baptist and Pizarro were not involved in PPT’s District Court case, he said.

“For this reason, GEICO’s declaratory judgment claim regarding Ms. Baptiste’s and Ms. Pizarro’s failure to cooperate was not a compulsory counterclaim in the District Court action … and dismissal under [Rule 12(b)(9)] is not appropriate,” Curran concluded.

ISSUE: Could an insurer bring a Superior Court action for declaratory judgment stating that it did not have to pay a PIP claim because of “non-cooperation” by an insured when a non-payment action by the provider who provided post-accident treatment was already pending in District Court.

DECISION: Yes, because the parties were not identical in the two actions